Changing of the guard brings new opportunities to Moscow real estate

by
at 24/11/2010 15:49

The ripples from the sacking of Moscow mayor Yury Luzhkov are sending shudders through the city’s construction and real estate sectors.

And while the recent of arrival of Sergei Sobyanin in City Hall has seemingly clipped the wings of the previously all-powerful Inteko group, Daniil Seledchik, general director of housebuilders Etalon-Invest, feels it’s too early to judge the new marketplace.

Inteko, owned by Luzhkov’s wife Elena Baturina, is no longer dominating the market – but Seledchik was reluctant to speculate about who would be the new top dog.

New mayor – new rules

“I see it as a development,” Seledchik said of Sobyanin’s arrival in office. “It is too early to say that some new rules or orders have been set up, because too little time has passed since his appointment.

“At the same time we are seeing the change of the team, and in all likelihood there will be more changes, but our company sees change as development.”

With the recession coming to an end, the new broom at City Hall is likely to encourage new contenders coming into the market.

But Seledchik said it was too early to discount Inteko as a major player.

“It is always difficult to talk about the competitors, because you always have to be civil, but I think that it [Inteko’s position in the market] must have changed in some way. But I cannot comment on how it has changed.”

The crisis is over

While Seledchik expects a slight decline in the market compared with last year, he believes that the underlying trends mean the cataclysms of 2008 are firmly in the past.

“In recent times I think we have seen stabilisation, and a lot of construction sites that were frozen during the crisis are up and running again. Demand is appearing, it is more active, which is notable. And at the moment I think the signs of crisis are over. The market has not returned to its previous level yet, but the decline has stopped.”

Demand outstrips supply

Etalon-Invest’s ‘Emerald Hills’ complex in Krasnogorsk is due to open in 2011, helping to meet burgeoning demand for new-build homes

However, even if the demand for flats is increasing, there is still a shortage of properties as the supply is not back to the pre-crisis levels.

The uncertainty over the economy discouraged people from spending big, and many developments were put on hold or cancelled.

As a result even the increased volumes under construction today mean there is a shortfall of new-build residential developments going up.

“In the crisis, very few companies started new large-scale construction projects. This is why I think that there will be a significant deficit. Very few construction sites opened during the crisis.”

Prices rising

This situation is in turn driving the prices up, even if the current average of $4,529 for a square meter in a Moscow flat is lower than in 2008.

“The prices are already increasing. It can be explained, I believe, by the end of the crisis, first of all. Secondly, there is less new real estate, but we are definitely seeing a rise of real estate prices.”

However, current prices are still far from what they used to be.

“Before the crisis real estate in Moscow was comparable with top end real estate in London and Paris, so I think that today there is still room for more growth.”

New possibilities

One of the possible developments for the real estate is the buy-to-let market. This has flourished in European capitals like London, but has not caught on in Moscow yet, Seledchik said.

“This market is not developed here at the moment, although some companies are emerging. In St. Petersburg I know the first operators are mostly using foreign capital, because it is a very conservative business and it requires long-term investment.

“It can be compared to hotels. And there are no major players in it yet, as far as I know.”

Moscow companies, however, have not gotten into this business yet. “Some companies have started paying attention to it. In Moscow I don’t know of any large operators. But individuals are certainly starting to make waves in this area.